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Author: Admin

Most of us, CFOs or other financial statement users, complain about the length and growing length of financial disclosures. We thought this concept release from SEC was quite interesting – and as there is a chance for one to voice their opinion, we chose to pass this blog from Edith Orenstein along.

Note: Edith Orenstein, as Director of Accounting Policy Analysis & Communications for Financial Executives International (FEI) supported and coordinated Rick’s efforts while representing life science companies and microcap companies on the elite 2005 SEC Advisory Committee on Smaller Public Companies. She initiated the FEI financial reporting blog in 2004 and it has been a great source for all CFOs. Since Edith left FEI, she has continued to blog.

As detailed in the MACPA blog, the Concept Release can be boiled down to seven general areas, six of which begin with the phrase "Whether, and if so, how." Being a fan of mnemonics, I view these as the 'Seven Wishes,' described in the Concept Release as follows:

whether, and if so how, specific disclosures are important or useful to making investment and voting decisions and whether more, less or different information might be needed;

whether, and if so how, we could revise our current requirements to enhance the information provided to investors while considering whether the action will promote efficiency, competition, and capital formation;

whether, and if so how, we could revise our requirements to enhance the protection of investors;

whether our current requirements appropriately balance the costs of disclosure with the benefits;

whether, and if so how, we could lower the cost to registrants of providing information to investors, including considerations such as advancements in technology and communications;

whether, and if so how, we could increase the benefits to investors and facilitate investor access to disclosure by modernizing the methods used to present, aggregate and disseminate disclosure; and

any challenges of our current disclosure requirements and those that may result from possible regulatory responses explored in this release or suggested by commenters.

If there ever was a time for constituents to provide their 'wish list' to the SEC on how to improve disclosures, now would be that time. Although early hopes of some constituents were focused on reducing 'disclosure overload,' some may say the genie was let out of the bottle when the Commission began referring to the project by the broader title of 'disclosure effectiveness.' However, the broader title incorporates the notion – consistent with the SEC's mission of protecting investors, maintaining fair, orderly and efficient markets, and facilitating capital formation – that certain increases in disclosure may be necessary to enhance the usefulness of disclosure to investors and others, with the goal of enhancing disclosure being primary, and the goal of making disclosure 'efficient' being a secondary, allied goal.

As noted by Chair White at the open commission meeting earlier today (April 14, 2016), the disclosure effectiveness initiative is, "a multi-faceted effort that began in late 2013 with a staff report to Congress, mandated by the JOBS Act, on how to update and modernize our disclosure requirements." The Chair then commissioned SEC staff to do indepth studies on the disclosure requirements in Reg S-X and S-K, and there were some preliminary invitations for public comment leading up to today's formal issuance of the Concept Release.

In addition to Congressional interest, other groups orbiting the disclosure effectiveness initiative include a number of SEC advisory committees and private sector constituent groups. The Concept Release notes, "we welcome comments from investors, registrants and other market participants on any other concerns related to our disclosure requirements," and, "[i]n addition to comments received on this release, we will consider any input from investor focus group studies or surveys, the Investor Advisory Committee and the Advisory Committee on Small and Emerging Companies."

As most of you know, CFO Network focuses on all technical aspects of US GAAP accounting – from companies going through their very first audit, to companies considering M&A transactions, or an IPO, or public companies wrestling with the demands of SEC Reporting and SOX 404b.

At our core, we are very strong in the area of revenue recognition. Tony Riley and I would like to add our spin to the revenue recognition evolution that is the new accounting standard, or ASC 606 to us ‘accountants’.

The new revenue recognition may seem innocent enough and so most people are avoiding or underestimating it. However, the devil is in the details. Inaction today will impact the future and surprises could happen.

This change is not just for accountants. While the list of tasks for accountants is seemingly self-evident, ASC 606 has cross-functional impact including in areas such as:

Legal

IR

IT

HR

Internal Audit

Treasury/loan covenants

Sales & Marketing

Operations

Tax

Remember the early 2000’s and the disruption from the initial SOX compliance – too much to do, too few people to help. And that was for a compliance matter. Now we have a new way of calculating the top line!! How do we get people to take action! It is a problem for all of us.

It’s effective 2018 – or has it really been in effect since January 1, 2016!!

In addition to the FEI Webinar, we have a couple of short pieces that may be of interest

Our friends at Strategy Law issued a Memo from their legal point of view. (It is a 2-pager that is focused on the non-accountant.)

SEC report deadlines wait for no one, so when you’re swamped with your full-time operational day job and are understaffed, with no qualified candidates in sight, we are your flexible on-demand resource.

They have a broad range that skill and bring an approach that is based on experience rather than just theory. They know what works. They can move very quickly.
Christine Theriault, XOMA Corporate Controller

Neither a retiring CFO nor a talent loss changed XOMA’s need to quickly file its 10-Q. We supplied the on-demand, just-in-time expertise in SEC reporting, technical accounting and SOX to get the job done.

We filed our first S-1 in just 41 days. We couldn't have done it without Tony and Rick.
Ed Schaffer, Rimini CFO

Fast-growing Rimini Street: understaffed; no SEC experience. We quickly mobilized an experienced team, challenged the auditors and won and produced one of the fastest successful S-1 filings ever done in Silicon Valley.

We originally hired CFO Network for the 10-K. We then needed them for the subsequent 10-Q and SOX. They are a great on-demand resource.
Cyril Allouche CareDx Corporate Controller

Newly public CareDx had 6 months to file its 10-K in full compliance w/ SOX 404, using COSO 2013 expanded guidelines, on a tight budget. We provided the expertise as needed to fill the gaps in their team.